Shake Shack, GoPro, Housing: Doug Kass' Views

Doug Kass shares his views on why housing will struggle in the second half of the year, and why investors should avoid Shake Shack and GoPro.

NEW YORK (Real Money Pro) -- Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.

Why Housing Still Worries Me

Posted at 1:57 PM EDT on Tuesday, May 26, 2015

"Many existing home owners still have low teaser rates, low rate adjustable mortgage loans or have refinanced down to low fixed mortgage rates, all of which are no longer available or have limited availability.

Now, with fixed-rate 30-year mortgage rates rising above 4%, many existing homeowners who plan to sell because their home has grown inadequate relative to their needs and want to trade up to more expensive homes are likely to begin to be forced into not selling (and then buying a larger home) because they can no longer replace their low mortgage rates with anything close to their previous mortgage rates.

The rise in mortgage rates will also likely have a materially adverse impact on home refinancings. Refinancings have historically provided a significant impetus to home renovations and refurbishings, as it delivers cash directly available for home improvements.

In addition, home affordability also will be negatively impacted by the nascent rise in inflation (most notably the recent rise in crude oil prices and other commodities) that digs into real incomes and consequently affordability.

Look for softness in housing fundamentals (sales activity, home prices and in renovations) during the second half of the year and reconsider investment in home builders and home improvement companies."